Correlation Between Zhonghong Pulin and Shanghai Action

Can any of the company-specific risk be diversified away by investing in both Zhonghong Pulin and Shanghai Action at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Zhonghong Pulin and Shanghai Action into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhonghong Pulin Medical and Shanghai Action Education, you can compare the effects of market volatilities on Zhonghong Pulin and Shanghai Action and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Zhonghong Pulin with a short position of Shanghai Action. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhonghong Pulin and Shanghai Action.

Diversification Opportunities for Zhonghong Pulin and Shanghai Action

0.08

Correlation Coefficient

Zhonghong Pulin  Shanghai Action

Significant diversification

The 3 months correlation between Zhonghong and Shanghai is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Zhonghong Pulin Medical and Shanghai Action Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Action Education and Zhonghong Pulin is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Zhonghong Pulin Medical are associated (or correlated) with Shanghai Action. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Action Education has no effect on the direction of Zhonghong Pulin i.e., Zhonghong Pulin and Shanghai Action go up and down completely randomly.

Pair Corralation between Zhonghong Pulin and Shanghai Action

Assuming the 90 days trading horizon Zhonghong Pulin Medical is expected to under-perform the Shanghai Action. But the stock apears to be less risky and, when comparing its historical volatility, Zhonghong Pulin Medical is 1.44 times less risky than Shanghai Action. The stock trades about -0.15 of its potential returns per unit of risk. The Shanghai Action Education is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,306  in Shanghai Action Education on September 28, 2024 and sell it today you would earn a total of  102.00  from holding Shanghai Action Education or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Zhonghong Pulin Medical  vs.  Shanghai Action Education

Zhonghong Pulin Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhonghong Pulin Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhonghong Pulin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shanghai Action Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Action Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhonghong Pulin and Shanghai Action

The main advantage of trading using opposite Zhonghong Pulin and Shanghai Action positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhonghong Pulin position performs unexpectedly, Shanghai Action can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shanghai Action will offset losses from the drop in Shanghai Action's long position.

The idea behind Zhonghong Pulin Medical and Shanghai Action Education pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.